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The Price of Gold

The Administration is ready to send legislation Congress formally devaluing the dollar by raising the price of gold from $35 to $38 an ounce. Chairman Patman of the House Banking and Currency Committee intends to hold hearings on the bill later this month. We trust that the committee will speedily approve this bill since devaluation is completely in the national interest—and to delay might result in intensifying uncertainties about the dollar.

There will be strong temptation in both House and Senate to use the gold bill as a vehicle for dealing with other issues such as trade, convertibility, international monetary reform, or the right of American citizens to buy and sell gold bullion. All such issues are separable from this gold bill. Setting the $38 price is simply formal means of changing the exchange rates between the dollar and other currencies in accordance with the Smithsonian agreement of last December; it will make American exports cheaper and imports dearer.

It was probably unwise of Secretary Connally to have linked the Administration's willingness to ask Congress to change the gold price to his obtaining trade concessions from foreign governments, for the Administration does not have much to show at this point. It has obtained some concessions from Japan, a few from Europe, and the agreement of both to enter into “comprehensive trade negotiations” with the United States next year—if Congress approves. However, there has been no agreement with Canada despite months trade talks.

It would be risky to entangle the gold bill in what could become a long and bruising trade debate. As it is, Senator Hartke of Indiana and Representative Burke Massachusetts are preparing to push their own version of a trade bill that is so protectionist that it would a disaster both for United States shipments and investment abroad and for jobs and income here at home.

Unnecessary delay on the gold bill would serve the Interests of speculators and undermine confidence in the dollar. The run‐up of the gold price above $48 in markets abroad has been a result primarily of the calculated withholding of gold supplies by big Swiss banks and South African interests, playing upon public doubts and fears. Congress will help calm international markets by expeditiously changing the gold price, as the Administration requests.

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